How to pay catchup from changing payroll frequency from biweekly to semimonthly

Hey team,

I'm in the process of switching from biweekly payroll to semimonthly. The actual change is simple, but I was wondering what should be done about the "catchup" that I need to now pay my salaried employees.

We have yet to hit a month where three checks went out, so the overall payout from biweekly pay is much less than it would have been under semimonthly checks, so I owe my employees an extra payment to offset the difference. I was thinking of adding on a one-time benefit to the next pay period that catches them up to where they should be, but was not sure if this was the right way to do this (likely not as a bonus because those have different tax rates). What's the best way to achieve this in QBO?

Re: How to pay catchup from changing payroll frequency from biweekly to semimonthly

Good to see you in the Community. I can help share some insight about adding an extra payment to your employees' paychecks for the next pay period.

You can either create an additional paycheck for each employee to catch up for their current wage or enter a new other earnings item to their paychecks to get this straightened out. Other earnings are taxable payments to an employee that are separate from regular wages and used to calculate deductions.

If you prefer the latter, please refer to the steps below to set this up:

On the left pane, select Workers.

Choose Employees.

Select the name of the employee.

Click the Pencil icon next to Pay.

Scroll down and click Even more ways to pay....

Click Add additional pay types, and enter a unique name for the pay type.

Enter the amount in the $ field to make the amount recurring, or leave it blank and just enter the amount when running payroll so you can use it for other employees.

Click Done.

After that, you can add this pay type to your other employee's profile. Then, when you're ready to run payroll, just enter the extra payment in the new payroll item's field.

That should get you back on track. Stay in touch if you have any other questions about this process, or if you have any other questions about payroll. I'll be happy to help you out. Have a wonderful day.

Re: How to pay catchup from changing payroll frequency from biweekly to semimonthly

@MaryGraceS thanks for the advice! This was the direction I was headed towards so I'm glad I got confirmation of that. Out of curiosity, if it were the reverse problem and I needed to reduce the amount paid on each check, would you recommend a new deduction type?

Re: How to pay catchup from changing payroll frequency from biweekly to semimonthly

Thanks @ShiellaGraceA. Shouldn't I use a pre-tax deduction since I would have already paid the tax on the extra amount given in the prior checks? I wouldn't want to be double taxed on the difference between the older checks and the current ones.

Example scenario:

Original paycheck is for $1000/mo for as $12000 salary.

New paycheck is for $800 for a $9600 salary.

After 6 months, I've already paid my employee $6000, so he is due $3600 for the remaining 6 months.

Quickbooks will create a check for $800 but I want to reduce it to $600 so that I'm not overpaying. I should add a pre-tax deduction to the $800 check reducing it to $600 since I already paid taxes on the $200 difference in the previous checks

Alternatively, I could adjust the annual salary so that going forward, Quickbooks creates the $600 paycheck. I would then reset the salary to the desired amount at the end of the fiscal year. This option feels dirty though.

Re: How to pay catchup from changing payroll frequency from biweekly to semimonthly

Setting up your deduction item as Other after tax deduction means that your deductions are taken out from your employee's net pay. And setting it up as a Pre-tax deduction denotes that deductions are taken out from the gross pay.

Also, if you set up your deduction as pre-taxed, you won't be taxed twice on your paychecks.

You may follow the steps given by my colleague above in setting up a deduction.